With bills and food prices potentially heading higher, the Stocks and Shares ISA is arguably more important than ever. It’s one of the only ways to give money a fighting chance to grow faster than inflation.

Plus, because no tax is paid on dividends or capital gains inside an ISA, more returns stay invested, which can really turbocharge compounding. As a result, it’s perfectly possible to grow a really attractive second income over time, even £10k a year. 

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Looking back 

A high-quality business will grow its earnings and often dividends over time. This should result in its shares becoming more valuable, as more investors want a piece of the thriving enterprise.

Take Games Workshop (LSE:GAW) as a prime example. Back in 2016, the Warhammer maker reported earnings per share (EPS) of 42.1p and a 40p dividend. Fast forward to 2025, EPS was around £6 and the dividend 520p.

The FTSE 100 company has also become far more profitable over this time, with its operating margin ballooning to 42% from just under 15%.

Someone who invested £2,500 a decade ago would now have roughly £90,000, with dividends taking the total return above £100,000.

Rare breed

Admittedly, Games Workshop is a rare outlier. Indeed, it’s the best-performing UK share of the last two decades. But it also shows what’s possible from an income perspective.

Unfortunately, for investors buying the stock today, it’s less of an income bonanza. The dividend yield is only 2.3%, which is lower than the FTSE 100 average of 3.2%.

Moreover, rising inflation doesn’t help the disposable income of Games Workshop’s customers. With the stock also valued highly, this isn’t one I will load up on today.

That said, I won’t be selling my existing Games Workshop shares. It’s one of the UK’s best-run companies, with a growing global army of loyal customers, unique IP, and long-term pricing power.

Looking forward

In a bid to increase my passive income, I bought shares of Londonmetric Property (LSE:LMP) in February. And I couldn’t have timed it any worse, because the real estate investment trust (REIT) has fallen 16% in four weeks!

The problem is the threat of higher interest rates, which would make it more difficult for Londonmetric to grow its portfolio (REITs tend to rely on debt to fund property acquisitions).

However, taking a long-term view, I’m still bullish. The REIT’s portfolio is built around four resilient sectors, including healthcare (12.5%) and urban logistics (54%). The latter is in tight supply, which favours long-term rental growth.

I like the balance here, with logistics assets having shorter leases due to high demand, while leisure is decades-long (Alton Towers, for example). The average number of years left on tenants’ contracts is 16.4. 

While dividends are never ultimately guaranteed, I’m optimistic about this one’s long-term income prospects.

Passive income

Returning to my original question then, how big does an ISA have to be to generate a £10k second income?

Well, Londonmetric’s now sporting a 7% dividend yield. If an ISA’s overall yield matched this, its value would need to be around £143k for £10k in dividends.

Assuming an average 8% return, with dividends reinvested, it would take 13.5 years to reach this amount by investing £500 every month.